Oregon budget: What comes next?

SALEM— Republicans may have defeated Democrats’ first stab at raising taxes on corporations and the rich this week, but that doesn’t mean tax increases are out of the picture.

There’s plenty of time left for a compromise before the June 30 deadline for lawmakers to approve a new state budget, and Republicans say they’re willing to talk.

By demanding tax increases, which require a three-fifths supermajority, Democrats have handed a powerful bargaining chip to the GOP minority. And Republicans have named their price: Steeper cuts to public-employee pensions in exchange for additional revenue.

The failure Wednesday of a Democratic plan to raise $275 million in additional revenue shows the GOP can stick together.

“I think it sent a clear message: Republicans are serious,” said Sen. Larry George, a Sherwood Republican who is negotiating a bipartisan revenue plan that could be key to resolving the impasse.

House Democrats’ $275 million tax-increase plan was stripped of its contentious pieces and approved without opposition Wednesday. The House only had enough votes to collect more taxes from companies with off-shore accounts and dropped plans to phase out income tax deductions for wealthy taxpayers and increase the corporate minimum tax on companies with revenue over $100 million.

In a separate vote, Democrats approved a plan to cut pension benefits for retired government workers, mostly by limiting inflation adjustments for retirees earning more than $20,000 a year. Republicans opposed, saying it didn’t go far enough. It goes to Gov. John Kitzhaber, who says he’ll sign it.

House Speaker Tina Kotek, D-Portland, isn’t backing down from her hard line against further pension cuts, despite Republican demands for more.

“We have done enough in terms of taking money from retirees, now we have to move to taking money from tax breaks and wealthier households,” Kotek said after the vote Wednesday.

The tax debate moves to the Senate, where Sen. Ginny Burdick, a Portland Democrat who chairs the Finance and Revenue Committee, said Democrats will continue working toward raising $275 million in new revenue. They’ll try to craft a bill that’s “fair, takes into account the struggles we’re still going through and raises the necessary revenue to balance our budget and fully fund education,” she said.